Manila new tax law confuses consumers

Manila new tax law confuses consumers

MANILA (UPI): Confusion swept across the Philippines yesterday as the government implemented an expanded value added tax law that hikes to 10 percent levy on a wide range of service industries.

Consumers coming off the holiday hiatus were surprised to find that shops and markets have jacked up prices of basic commodities such as meat, rice and sugar as the law took effect Monday.

"Why did the prices go up suddenly?" a lady consumer asked. "If the government wants to raise taxes does it mean we should pay more too?"

Bureau of Internal Revenue director Liwayway Vinzons-Chato said prices of commodities and services covered under the E-Vat should not rise more than 10 percent.

Chato urged consumers to be vigilant and report establishments taking advantage of the law, saying the bureau has the power to close businesses not following the E-Vat.

She said the bureau has set up hotlines to help consumers and even business establishment understand the new law.

The E-Vat law was signed in 1994, but its implementation was delayed when the Supreme Court issued a restraining order after several members of the Congress questioned its constitutionality.

In November 1995, the high court lifted the order, paving the way for the law's implementation which was expected to generate some 7.9 billion pesos (US$301.52 million) in revenues this year.

The E-Vat covers most service sectors such as telecommunications, restaurants, transportation, publications and real estate. Exempted from the law are agricultural products, fertilizers and basic consumer commodities such as meat and vegetables.

Rep. Wigberto Tanada said he felt "saddened" that the government implemented the law despite opposition from several sectors, saying "it will bring more difficulties to the poor." "This is anti-poor," he said. "We do not need this law."

Tanada warned it would be difficult for the government to monitor businesses that would unreasonably raise prices, adding it could even fuel inflation this year.

But economic analysts played down the possible negative effects of the new tax law, saying the Philippines would benefit from a "standardized taxation."

Yuri Alliado, an investment analyst at Philippine Asia Equities Securities, said a "widening of the tax base" would prove beneficial to the country in the near future as more and more firms set up shops.

"Objectively this is not really inflationary," Alliado said. "What is wrong with expanding (taxation) to certain industries? Tax is only 10 percent and not in any way going to affect operations."

But he said the government needs to launch more information campaigns, as negative sentiments over three successive months of double-digit inflation beginning in September has left sour marks.

"There is apprehension at the moment," he said. "People just do not realize the good certain government moves bring as the whole market is made up of expectations."